Firm is latest to cut output estimates after El Niño weather pattern reduced rain in Thailand and India
By JULIE WERNAU 3/25/16
Droughts in the world’s largest sugar producing regions have curbed yields more than expected, Platts Kingsman said Wednesday, with demand for the sweetener expected to outstrip new supply by 7.6 million metric tons this season, a 2.5 million-ton increase over its previous estimates.
Kingsman is the latest firm lining up to slash production estimates after the El Niño weather pattern reduced crucial monsoon rains in Thailand, the world’s second-largest sugar exporter, and in India, the second-largest producer.
“The fact is that we’ve had four to five years of too much sugar—four or five years of feast, and we’re now looking for the first time at a sizable deficit,” said Tim Worledge, editorial director, Platts Agriculture.
Analysts are expecting demand in the global marketing year that ends Sept. 30 to outstrip new supply this year after five consecutive years of production surplus.
Earlier Wednesday, Green Pool Commodities increased its forecast for the global sugar deficit, saying consumption will exceed supply by 6.65 million tons, up from an earlier forecast of 4.14 million tons for the crop year that ends in March. Last week, Rabobank said consumption will exceed production by 6.8 million metric tons in 2015-16, 2.1 million tons more than its previous forecast.
In India, many mills have stopped operating because there is no cane left to crush, Platts said. As of March 15, 325 sugar mills were still operating, compared with 473 a year earlier. The firm is expecting average agricultural yields in Maharashtra, where the most mills operate, to drop 18% year-over-year.
In Thailand, dryness has dramatically reduced production this year and is expected to hurt next year’s crops that were sown during the monsoon season that began in July, Platts said. Government-mandated water rationing has hit a third of the country, the firm said, after seven of 67 provinces were hit by drought.
Thai mills are crushing 550,000 million tons of cane a day, down 32% year-over-year.
Raw sugar prices have risen 9.6% year-to-date and closed Wednesday at their highest since Oct. 14, 2014,